Poverty dynamics and graduation from conditional cash transfers: a transition model for Mexico’s Progresa-Oportunidades-Prospera program

Abstract

The effects of conditional cash transfers (CCTs) on poverty and well-being have been widely studied. However, there is limited knowledge on how a CCT should respond to the dynamics of poverty. How should program administrators treat beneficiaries that exit poverty in period t-1, but exhibit a high probability of falling into poverty in period t? This is a relevant, yet unanswered question. This paper provides an analysis of the implications of poverty dynamics in the implementation of graduation strategies of CCTs, taking Mexico’s Progresa-Oportunidades-Prospera (POP) program as reference case. We propose a Markovian transition model that allows to control for unobserved heterogeneity, state dependence, and attrition. The model provides a framework for a generic graduation condition that can be applied to cash transfer programs that follow well-defined eligibility income thresholds. Overall, we find that only one-third of program beneficiaries that were poor in 2002 exhibited low probabilities of becoming poor in 2009–12 and therefore could be regarded as true ‘graduates’ of the program. We also find that the ‘recertification’ process of POP—which takes place every three years—would be more efficient if it took place every 3.7 and 5.1 years in urban and rural areas, respectively.

Notes

Acknowledgments

We thank Armando Barrientos, Finn Tarp, Tony Addison, Jukka Pirttilä, Saurabh Singhal, and participants at the internal seminars of UNU-WIDER in Helsinki and the 22nd Annual Meeting of the LACEA/IADB/World Bank/UNDP Research Network on Inequality and Poverty, in Santiago, Chile, for their useful comments on earlier versions of this paper. We gratefully acknowledge funding from UNU-WIDER. All the errors are ours.

Households with predicted income above a second poverty line are graduated.

⋅ Household with children or youths under the age of 22 years of age and/or women on fertile age.

Peru: Juntos.

⋅ Proxy means test (Sisfoh) with assignment score.

Determined by age of youngest child.

Household becomes ineligible.

⋅ Households with children under 19 years of age.

Source: Authors with information from the operating rules for each program

Table 6

Descriptive statistics

Rural

Urban

Covariates

Poor (mean)

Poor (SD)

Non-poor (mean)

Non-poor (SD)

Poor (mean)

Poor (SD)

Non-poor (mean)

Non-poor (SD)

Physical characteristics

Type of dwelling

Individual house/ does not share walls

0.787

0.410

0.798

0.402

0.682

0.466

0.672

0.470

Floor material

Firm cement

0.534

0.499

0.613

0.487

0.663

0.473

0.437

0.496

Walls material

Concrete/ partition/ brick/ block

0.632

0.483

0.644

0.479

0.881

0.324

0.916

0.277

Roof material

Concrete/ partition/ brick/ block

0.365

0.482

0.441

0.497

0.663

0.473

0.692

0.462

Source of drinking water

Tap water inside the dwelling

0.543

0.498

0.480

0.500

0.319

0.466

0.306

0.461

Type of toilet

Latrine

0.399

0.490

0.361

0.481

0.078

0.268

0.062

0.240

House has electricity

0.967

0.180

0.978

0.147

0.991

0.094

0.994

0.075

Telephone landline

0.143

0.350

0.200

0.400

0.415

0.493

0.492

0.500

Own paid house

0.595

0.491

0.627

0.484

0.502

0.500

0.637

0.481

Sewage service

0.216

0.412

0.222

0.416

0.779

0.415

0.790

0.408

Garbage collection service

0.336

0.473

0.428

0.495

0.888

0.316

0.902

0.297

House surrounded by residues

0.058

0.234

0.039

0.192

0.023

0.150

0.020

0.140

Persons per bedrooms

3.510

1.841

2.945

1.519

2.809

1.342

2.520

1.248

Household head

Age

43.40

14.02

44.96

13.56

39.88

11.24

42.29

12.48

Male = 1

0.795

0.404

0.850

0.357

0.835

0.371

0.816

0.388

Years of education

4.381

3.486

4.569

3.629

5.871

4.004

5.803

4.061

Spouse’s age

30.31

19.11

33.05

18.64

29.77

16.51

30.60

18.04

Spouse’s years of education

3.551

3.453

3.926

3.618

5.277

4.181

5.069

4.294

Other household members

Mean household age

22.97

8.464

24.704

8.261

22.49

7.073

24.64

7.861

Mean household years of education

3.857

1.815

4.349

1.961

4.763

2.110

4.991

2.152

Max. years of education of household members

7.706

2.637

8.356

2.748

8.967

2.801

9.233

2.842

Number of children under 6 years

0.992

1.005

0.809

0.902

0.872

0.883

0.708

0.821

Number of children under 15 years

2.648

1.643

2.253

1.488

2.180

1.312

1.853

1.194

Mean age of children

5.245

4.069

5.724

4.359

5.332

4.171

5.734

4.454

Dependency ratio*

2.303

1.137

2.030

0.936

2.050

0.867

1.840

0.723

Pregnant in the household

0.050

0.219

0.049

0.216

0.031

0.172

0.044

0.205

Member with chronic illness

0.381

0.486

0.470

0.499

0.310

0.463

0.458

0.498

Children attend school

0.760

0.428

0.745

0.436

0.575

0.495

0.659

0.474

Assets

Household owns other house

0.176

0.381

0.228

0.419

0.068

0.252

0.138

0.345

Bicycle

0.242

0.429

0.389

0.488

0.158

0.365

0.405

0.491

Vehicle

0.114

0.318

0.275

0.446

0.112

0.316

0.321

0.467

Electric appliances

0.447

0.498

0.711

0.453

0.328

0.470

0.683

0.465

Washing machine

0.394

0.489

0.668

0.471

0.326

0.469

0.674

0.469

Financial assets

0.035

0.184

0.071

0.257

0.054

0.225

0.184

0.388

Agricultural machinery

0.009

0.095

0.036

0.187

0.005

0.071

0.028

0.164

Cows

0.052

0.222

0.088

0.284

0.003

0.051

0.020

0.140

Horses

0.104

0.305

0.123

0.329

0.010

0.101

0.016

0.125

Pigs or goats

0.085

0.279

0.151

0.358

0.013

0.112

0.026

0.158

Poultry

0.157

0.364

0.256

0.437

0.037

0.189

0.055

0.227

Shocks in the last five years

Household member died

0.067

0.250

0.098

0.297

0.067

0.250

0.086

0.281

Household member suffered accident

0.103

0.305

0.131

0.337

0.117

0.322

0.143

0.350

Household member lost employment

0.052

0.223

0.061

0.238

0.115

0.320

0.106

0.308

Household was victim of natural disaster

0.013

0.112

0.027

0.162

0.009

0.096

0.007

0.082

Household lost a crop

0.086

0.280

0.112

0.315

0.008

0.088

0.015

0.121

Instruments for initial conditions

Parental years of education of head

1.235

2.642

2.652

3.300

0.737

1.7724

1.570

2.46

Elevation

1292.1

789.64

1319.8

794.87

1479.7

976.48

1511.6

973.61

Precipitation

14.99

18.54

13.68

16.57

20.63

21.02

16.31

16.27

Temperature

82.35

37.31

88.71

39.09

76.53

39.78

74.88

40.75

Instruments for retention

HH head in different municipality at 12

0.458

0.496

0.668

0.480

0.738

0.465

0.776

0.441

Distance to nearest state capital (degrees)

0.781

0.673

0.782

0.861

0.667

0.623

0.708

0.892

Number of observations (households)

631

2,693

437

1,226

(1) * Dependence ratio is defined as the number of members under 14 years and over 65 years divided by the number of members between 15 and 64 years of age. (2) Eligibility according to CL; (3) Weighted number of observations

Source: Authors based on MxFLS-I

Table 7

Transition probabilities estimates

Transition estimates - Pr(Pit− 1 = 0|Pit = 1)

Rural

Urban

Estimate

Marginal

Estimate

Marginal

Physical characteristics

Type of dwelling

Townhouse sharing walls

−0.036

−0.056

−0.148**

−0.059

(0.070)

(0.048)

Floor material

Firm cement

0.104

0.102

−0.099

−0.057

(0.089)

(0.062)

Walls material

Concrete, partition, brick, block

0.215**

0.180

0.245*

0.134

(0.069)

(0.125)

Roof material

Concrete/partition/brick/block

0.177**

0.133

−0.005

0.053

(0.068)

(0.075)

Source of drinking water

Tap water inside the dwelling

0.160***

0.083

0.126**

0.050

(0.044)

(0.048)

Type of toilet

Latrine

−0.057

−0.093

0.039

0.078

(0.072)

(0.101)

House has electricity

0.151

0.148

0.056

0.047

(0.171)

(0.330)

Telephone landline

0.104

0.123

0.059

0.061

(0.074)

(0.070)

Own paid house

0.000

0.001

0.152**

0.053

(0.081)

(0.059)

Sewage service

0.087

0.110

0.101

0.092

(0.058)

(0.091)

Garbage collection service

0.288***

0.116

0.182*

0.134

(0.068)

(0.109)

House surrounded by residues

−0.395**

−0.233

−0.033

−0.059

(0.145)

(0.196)

Persons per bedrooms

−0.101

−0.145

−0.056**

−0.020

(0.021)

(0.017)

Household Head

Age

0.002

0.003

−0.009***

−0.012

(0.003)

(0.003)

Male = 1

−0.027

−0.047

0.187**

0.010

(0.114)

(0.087)

Years of education

0.006

0.004

0.007

0.054

(0.010)

(0.008)

Spouse age

0.004*

0.002

0.001

0.065

(0.002)

(0.002)

Spouse years of education

0.020**

0.016

0.004

0.059

(0.007)

(0.011)

Other household members

Mean household age

−0.000

0.000

0.007

0.008

(0.004)

(0.005)

Mean household years of education

0.018

0.109

0.007

−0.036

(0.029)

(0.025)

Max. years of edu. of household members

0.026

0.069

0.015

0.037

(0.024)

(0.011)

Number of children under 6 yo

−0.034

−0.053

−0.0887*

−0.028

(0.039)

(0.053)

Number of children under 15 yo

0 .120**

−0.021

−0.070*

−0.010

(0.042)

(0.042)

Mean children age

−0.007

−0.001

−0.005

0.002

(0.009)

(0.005)

Dependency ratio*

−0.016

−0.020

−0.117**

−0.005

(0.043)

(0.050)

Pregnant in the household

−0.118

−0.059

−0.076

0.000

(0.076)

(0.057)

Member with chronic illness

−0.119**

−0.195

−0.067

−0.012

(0.061)

(0.065)

Children attend school

−0.014

−0.083

0.009

0.042

(0.060)

(0.075)

Assets

Household owns other house

0.211**

0.217

0.006

0.014

(0.064)

(0.061)

Bicycle

−0.077

−0.010

−0.086

−0.024

(0.062)

(0.075)

Vehicle

0.265**

0.123

0.010

0.027

(0.100)

(0.078)

Electric appliances

−0.087

−0.092

0.289

0.006

(0.065)

(0.197)

Washing machine

0.291***

0.106

0.231

0.001

(0.088)

(0.234)

Financial assets

−0.040

−0.018

0.064***

0.038

(0.141)

(0.016)

Agricultural machinery

0.230**

0.036

0.168

0.056

(0.142)

(0.154)

Cows

0.015

0.009

0.146

0.062

(0.073)

(0.210)

Horses

0.083

0.090

−0.380

−0.017

(0.092)

(0.247)

Pigs or goats

0.036

0.022

−0.014

−0.098

(0.061)

(0.174)

Poultry

0.111

0.079

−0.014

−0.010

(0.075)

(0.118)

Shocks in the last five years

Household member died

−0.037

−0.011

0.132

0.023

(0.073)

(0.089)

Household member suffered accident

−0.047

−0.002

−0.067

−0.014

(0.070)

(0.065)

Household member lost employment

−0.062

−0.052

−0.081

−0.022

(0.092)

(0.089)

Household was victim of natural disaster

−0.249

−0.026

−0.037

−0.039

(0.235)

(0.087)

Household lost a crop

−0.232**

−0.135

−0.292**

−0.203

(0.097)

(0.146)

Number of observations (households)

2,584

3,769

Source: Mexican Family Life Survey-I,II and III. Notes: (1) Robust standard errors in parentheses. (2) Estimations from a multivariate Probit model by simulation with 320 draws (3) State-level fixed effects and outputs for the baseline and retention estimations are not reported. (4) Inference: *** significant at 1%; ** significant at 5%; significant at 10%

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